What's the Difference Between a Boom and a Bull?

What's the Difference Between a Boom and a Bull?

What's the Difference Between a Boom and a Bull?

With things looking shaky in the economy and the stock markets, what do economists mean when the talk about the possible end of the boom and the bull (or the beginning of the bust and the bear)?

Advertisement

We'll get to "boom" in a second, but first some basics. This month the U.S. economy entered the 120th month of the longest expansion in U.S. history. (The last previous record was 106 months between February 1961 and December 1969.) Expansion means that the gross domestic product (GDP)--the value of all goods and services produced--went up. In the last quarter of 2000, the growth was only at an annual rate of 1.1 percent, but as long as the numbers are on the positive side, the country is not in recession. A recession is when the GDP declines for six consecutive months; the last recession lasted from July 1990 to March 1991. During an expansion the economy can contract for up to five months, but as long as it finally turns around by the sixth month, it is has not technically entered a recession, and even those few negative months will be considered part of an overall expansion. But with growth of only 1.1 percent, we are out of boom territory. A boom is a colloquial term for an economy that is expanding above the GDP's average annual growth. In recent years that average has been around 3.5 percent. The U.S. economy was booming between 1995 and 2000--in the last quarter of 1999 the economy grew at an 8.3 percent annual rate.

The longest bull market in history began in 1982 when the Dow Jones Industrial Average, at a low of 777, began its climb. General agreement describes a bear market as one in which the stock market declines 20 percent off its peak. As of last week, the Dow Jones was off by 16 percent.